Porter 5 forces analysis for Indian Shoe Industry for profitability/attractiveness

Porter 5 forces of Industry profitability Industry Analysis

Rivalry among competitors High (-) Unattractive

Bargaining power of Suppliers Low (+) Attractive

Bargaining power of Buyers High (-) Unattractive

Threat of new Entrants High (-) Unattractive

Threat of Substitutes High/Moderate (-) Unattractive

Industry Life cycle and External Analysis

Key Success Factor for Nike

The key success factors are most significant to future success of a firm in the industry. The KSFs for Nike are its distinctive marketing activities, extensive research and development effort to design premium concert athletic products for customers, product differentiation and extensive manufacturing, innovating and distribution capabilities. Superior performance in some or all of the factors creates a lot of value for the customers

Core Competency of Nike

Marketing –Nike is a marketing company. Its distinctive competency lies in the area of marketing, particularly in the area of consumer brand awareness and brand power.Research and Development-Nike’s R &D lab evaluated as “far & away the best” in the industry.Large number of patents testimony to its commitment to R &D

Nike’s Business Strategy Process

Business strategy of NIKENIKE has followed the generic business strategy of product differentiation.

Differentiation Strategy• Differentiation strategy - • provide products in athletics and various sports events; • for men, women, children providing preferences and choices; • catering for sports apparels; • accessories and sports equipments

• Emphasis on strategy elements • brand advertising• design of products• exclusive customer service• high quality product and • new product development and innovation - product engineering, innovation and

creativity and research capabilities

Differentiation Strategy• Aggressive Marketing• Target the Air Max, the first Nike footwear to feature Nike Air bags that were

visible. The campaign was supported by a memorable TV ad whose soundtrack was the original Beatles’ recording of ‘Revolution.’

• Just Do It, Bo Knows, Secret Tournament campaign

Differentiation Strategy• Number of products - reduce risk

• Related brands like Converse Inc, ColeHaan, Jordan Brand, NikeGolf, JumpMan23, Hurley International are some by which company differentiates its product lines and sells in particular markets

• Target consumers – High end, premium price paying, large age coverage (14+) consumers. Nike has also always targeted team sports for their promotion

• Branding – Swoosh Logo, Just Do It logo – more of lifestyle

• Acquisition - Nike acquired other brands like Adidas, Umbro, LuluLemon, Bauer

• Supplier Diversity program has had a favourable impact on Nike business by: • Creating more competition in the supply chain • Maintaining a connection to the consumer base • Contributing to the enhancement of the brand

• Sale of products - several options like retail outlets, Nike flag ship stores, retail discount stores, website sale

Differentiation Strategy

Future Strategy:Closed-Loop Business Model• Move closer to achieving zero waste by completely reusing, recycling or

composting all materials• Including up-front design of products that can be manufactured using

materials reclaimed throughout the manufacturing process and at the end of a product's life.

Future StrategyTo do this, Nike will need to:

• Innovate to deliver enterprise-level sustainability solutions

• Integrate sustainability into the heart of the NIKE, Inc. business model

• Mobilize key constituents (civil society, employees, consumers, government and industry) to partner in scaling solutions

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Tetra Threat Framework

THREAT OF HOLDUP

THREAT OF SLACK

THREAT OF SUBSTITUTIONTHREAT OF

IMITATION

ADDED VALUE

VALUEAPPROPRIATED

• Barriers to Imitation

• Economies of scale

• Shared distribution channels and efficient production reduces costs

• Patents & copyrights

• Nike has around 3775 patents in the sports shoes, apparels and the equipments domain e.g. Nike AIR technology, self lacing shoes, etc.

• Innovation

• Strong emphasis on R&D and product development through new designs(more than 300 designs a year)e.g. recycled polyester for jerseys

• Brand reputation and Image

• Celebrity endorsements & sponsorships of sports events

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Threat of Imitation

• Responses to substitution• Customization of footwear

• Online customization of footwear

• Aggressive advertising

• ‘Just Do It’ campaign

• Mergers and Acquisition

• Umbro, Converse, etc.

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Threat of Substitution

• Responses to Holdup• Multiple sourcing and Contracting

• Contract suppliers in China, Vietnam, Indonesia and Thailand; Argentina, Brazil, India, and Mexico

• Building relationships with complementors

• Tie up with Apple for the ‘Nike + iPod’ sports kit

• Increase Bargaining power

• ‘Just Do It’ advertising campaign

• Forward Vertical Integration

• Opened Discount stores in rural areas and flagship stores in urban areas

• Building Trust

• Improving working conditions through various programse.g. Joining FLA & GAWC, transparency through publishing monitoring results on the website

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Threat of Holdup

• Responses to Slack• Performance based incentives

• Pay dividends to the shareholders

• Nike encourages outsiders to become part of board, in order to avoid bias connected with “corporate conformism”

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Threat of Slack

• Nike’s current policy of constantly widening the range of sports which they produce could be continued and further expanded. Nike could look into different markets, for example Fishing, Hiking, etc.

• Nike could attempt joint ventures or acquisitions with companies to expand their product portfolio and also achieve economies of scale and access to markets.

• Nike could take their collaboration with Apple one step ahead by forming exclusive gamepads featuring games like soccer, cricket, golf, NHL, NBA, etc.

• Focus on different segments as well e.g. Age group 50+ with shoes specially meant for walking, custom footwear for women athletes.

• Nike should start ‘Ethical’ campaign against the counterfeit production to improve on its image.

• Nike could get into partnerships with other firms and setup sporting academies in developing markets as a brand building exercise.

• Nike could make available online training videos of sporting stars and give their access to customers complementary along with certain range of products.

• Nike could also get into sporting accessories like sunglasses which are highly profitable and are complementary in nature.

• Nike could cut down on the contracting in order to avoid threat of imitation and future competition.

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Recommendations

• Economies of scale• Brand reputation and Image• New designs and technology (recycled polyester for jerseys)• Customization of footwear• Relationships• Aggressive advertising• Sub brands ( Cole Haan, Converse, Hurley International, Hurley International,

and Umbro Inc)• Competition is non priced based on differentiation • Celebrity endorsements and sporting event sponsorships• Just do it campaign – signifies attitude, sports and lifestyle• Flagship stores for selling• Partnerships with retail discount stores like walmart• Contract suppliers in China, Vietnam, Indonesia and Thailand. And also in

Argentina, Brazil, India, and Mexico• Nike + ipod• Nike for women campaign

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Recommendations